Home Work Assignment 1. What is the role of hedge funds in financial markets? 2. Discuss the trading of derivative markets at over the counter markets? 3. What are the companies dealing in mutual funds and what are the benefits for the financial instituitions?

A. Hedge funds are always trying to work upon various types of price descrepency and they are trying to maximize their rate of return and they will be trying to eliminate various kinds of arbitrage opportunities and they will also strive to provide a high rate of return to their investors and maximize the rate of return.

B. Derivatives markets are providing the opportunities of hedging various contracts and it will be offering with forward contracts which is over the counter contract and it will have customised contract and they will have higher degree of counterparty risk.

C. There are various companies dealing in mutual funds and these companies are mostly investment bankers and they will be trying to maximize their rate of return as they will be offering various kinds of opportunities for investors via equity research or they will also be trying to maximize the rate of return by taking portfolio based positions.